The Iron Ore price has been trending lower this month after falling off a cliff at the end of January.
Iron ore is down close to 10% since the beginning of the year to around US$83, from about US$92.
What’s going on with the Iron Ore Market?
Iron ore prices have been dropping from fears of the coronavirus spreading.
Coronavirus has now caused over 1,000 deaths and, at time of writing, 43,000 people are infected. As travel restrictions and quarantines hit, the virus is already affecting the tourism industry.
Yet the fear is that the outbreak could cause an economic slowdown in China that could affect Australian exports, like iron ore. Many Chinese provinces ended up extending the Chinese Lunar New Year holiday in an effort to contain the virus, which could affect the supply chain and production.
Prices for iron ore have been trending lower after spiking last year to close to over US$120 after a dam burst in Brazil, killing hundreds of people. This stopped production, affecting global iron ore supply.
In fact, due to the accident and bad weather, Brazil’s Vale iron ore production saw a drop of over 20% in 2019. This has pushed Australia’s Rio Tinto Ltd [ASX:RIO] to become the world’s top iron ore producer.
Australia is the world’s largest exporter of iron ore, with a 50% share in 2018. It also had a drop in production last year because of a tropical cyclone, it’s followed by Brazil with a 20% share in 2018 and then South Africa (4.6%).
What happens next for Iron Ore?
The worry here is how the virus outbreak will affect the Chinese economy.
As China is the largest importer of iron ore in the world, we may have seen the peak for iron ore prices this year already.
Will the iron ore boom continue in 2020?
Lachlann Tierney at The Rum Rebellion thinks we could be entering an iron ore bear market, and he has three other investment ideas for investors that could fare better. To download his free report ‘Aussie Iron Ore Crash’ 2020 click here.